GM to invest $2 billion in 17 U.S. plants

By IBT Staff Reporter On 05/10/11 AT 5:48 PM

General Motors Co said on Tuesday it will invest about $2 billion in 17 U.S. plants, including one here that makes transmissions for small cars, as the automaker shifts from recovery mode to investing in future products.

GM said the investments over the next few years will create or preserve more than 4,000 jobs as it retools the plants in eight states. The company has 202,000 employees globally, including 77,000 in the United States.

We are doing this because we are confident about demand for our vehicles and the economy, GM Chief Executive Daniel Akerson said.

After speaking to workers at the 54-year-old Toledo Transmission Plant, Akerson told reporters that the company will expand production in line with sales increases.

We don't want to get in over our heads as far as supply and demand in adding production capacity, Akerson said.

Investors and analysts have speculated on GM's plans for its growing pile of cash as the company's liquidity has reached $36.5 billion. It earned $3.2 billion in the first quarter after posting net income of $4.7 billion for all of last year, its first full-year profit since 2004.

Akerson declined to comment specifically on plans for the cash when asked by reporters.

He said having liquidity and cash on the balance sheet gives the company more flexibility, and at the same time we have an obligation to our shareholders to try to maximize shareholder value. There are competing requirements and interests for all the cash.

Other than saying over the next few years, GM officials did not disclose the timeline for the investments or say which other plants would be upgraded. More announcements would be made over the next few months, GM said.

Executives previously signaled GM's focus on building cars would only grow, as shown by last week's announcement to invest $131 million revamping the Bowling Green, Kentucky, factory for a new version of the iconic Chevrolet Corvette sports car. The Kentucky announcement is part of the $2 billion plan.

Another key issue as GM adds jobs is how many will pay so-called second-tier wages, which are about half those of veteran union-represented employees. The lower wages will be a sticking point as major U.S. automakers face labor talks with the United Auto Workers this summer.

GM filed for bankruptcy in 2009 after the U.S. housing downturn and a spike in gasoline prices the year before that caused consumers to turn away from its high-profit but fuel-hungry trucks and SUVs.

The U.S. automaker emerged from bankruptcy 40 days later thanks to a $52 billion taxpayer-funded bailout and sold shares in an initial public offering last November. Since exiting bankruptcy, GM said it has invested $3.4 billion in its U.S. plants, creating or retaining more than 9,000 jobs.

The new investment is not a surprise and by delaying the details of the specific plants affected GM maximizes the attention it will receive as it works to assure taxpayers that the bailout was money well-spent, said Mirko Mikelic, senior portfolio manager with Fifth Third Asset Management.

They probably underinvested in some of these plants for the last few years, said Mikelic, whose firm has held GM bonds and preferred securities in the past and still follows the stock. They were keeping a handle on their cash. For years, in terms of R&D, they've been behind particularly Toyota (Motor Corp).

The U.S. government still owns 32 percent of GM's common shares, and many investors see that as an overhang on the stock. Last month, sources said the Treasury could sell a significant portion of its GM shares by fall.

TOLEDO PLANT

In Toledo, GM will invest $204 million and retain about 250 jobs so the plant can make a new eight-speed automatic transmission toward the end of 2012. Akerson did not specify for which vehicles the new transmission would be made. He said the new transmission will be more fuel-efficient and that they will be rolled out over the coming year.

The plant employs more than 1,600 people, including more than 1,450 hourly workers.

The plant makes transmissions for a number of vehicles, including GM's No. 2 selling Chevrolet Cruze small car. It also makes transmissions for trucks, which have not sold as well as high gasoline prices have once again pushed American consumers to more fuel-efficient vehicles.

GM, which employs 49,000 hourly U.S. workers, said any new hires would come in at a lower wage level, as agreed under its deal with the union. However, some of the positions would be filled with existing employees on the higher wage scale.

The UAW's goal has been to return all laid-off workers to active status and see the company begin hiring again, said Joe Ashton, UAW vice president for GM relations.

He added that GM will first hire back the 1,357 UAW workers currently on layoff before making new hires. He reiterated that should occur by September, when the labor deal expires.

The lower wages, introduced as part of concessions in labor talks with the automakers, have angered many rank and file UAW members. The top tier of UAW workers make about $28 per hour, enough to grant middle-class status.

The union has signaled it wants to share in the gains of the automakers, which are in a much better financial position than in 2007, when the last contract was signed.

Ashton said the upcoming talks will center on Jobs, jobs jobs. That's what it's all about. That's what we're going to discuss.

The UAW has pointed to rising profits and a hefty $26.5 million compensation package for Ford Motor Co Chief Executive Officer Alan Mulally in 2010 as a sign of the automakers' reviving health and say they want a bigger share of profits going to rank-and-file workers.

GM shares were up 0.7 percent at $31.61, below their initial public offering price of $33 last November.